Indurated Concrete Corp. v. Abbott

• Court: Maryland Supreme Court
• Writing for the Court: [10] Collins
• Citation: Indurated Concrete Corp. v. Abbott, 195 Md. 496, 74 A.2d 17 (Md. 1950)
• Decision Date: 07 June 1950
• Docket Number: 188.
• Parties: INDURATED CONCRETE CORPORATION v. ABBOTT et al.

74 A.2d 17

195 Md. 496

INDURATED CONCRETE CORPORATION v. ABBOTT et al.

No. 188.

Court of Appeals of Maryland.

June 7, 1950

Ralph W. Powers, Hyattsville, for appellant.

Jesse Lee Hall, Washington, D. C. and John F. Lillard, Jr., Hyattsville (John F. Lillard and J. Bowie Lillard, Hyattsville, on the brief), for appellees.

Before DELAPLAINE COLLINS, GRASON, HENDERSON and MARKELL, JJ.

COLLINS, Judge.

This is an appeal by Indurated Concrete Corporation, appellant, plaintiff below, from a judgment for costs rendered in favor of W. Glen Abbott and Addison T. Smith, appellees here, defendants below, in a suit in assumpsit.

The charter of appellant corporation was forfeited in February, 1933, for failure to pay the Maryland State Franchise Tax. At that time, W. Glen Abbott, one of the appellees, John Campbell Gurney L. Hunt, and Benjamin E. Abbott were its duly elected directors. Mr. John Campbell, the president of the corporation, died January 10, 1936. Mr. Hunt, the treasurer had died previously. Upon forfeiture of the charter these directors became the trustees for the creditors, stockholders and members of the corporation so dissolved. Code 1939, Article 23, Section 100. After the deaths of Messrs. Campbell and Hunt, the Abbotts became sole statutory trustees. The directors did not know that the charter had been forfeited until 1935 or 1936. From 1933 on, although the corporation was not in existence, the directors met stockholders meetings were held, and the business carried on as if it were a corporation. On April 15, 1940, receivers were appointed for the corporation. The receivership was dissolved and the charter of the corporation was revived in November, 1945.

On May 4, 1948, the directors were: Benjamin Abbott, James Campbell, Addison T. Smith, appellee, and W. Glen Abbott, appellee, the president. At a meeting on that date all the directors were present except Benjamin Abbott. At that meeting claims of Benjamin Abbott and W. Glen Abbott, appellee, were presented against the corporation in the amount of $720 each for services rendered as statutory trustees for the six year period, at $120 per year, from February 1, 1933, when the charter was forfeited until the receivers were appointed in 1940. At the same meeting Addison T. Smith presented a claim against the corporation in the amount of $2,160 for services rendered to the corporation from May 1, 1942, to May 1, 1948, at the rate of $30 per month. At this director's meeting on May 4, 1948, by a majority of one, W. Glen Abbott and Addison T. Smith voting to approve the claims, these were allowed. Mr. Campbell voted against payment. W. Glen Abbott received $400 from the corporation on his claim in two payments of $200 each, one made May 6, 1948 and the other January 10, 1949. Benjamin Abbott received $200 on his claim on May 6, 1948. Addison T. Smith received $1,000 on his claim in two payments of $500 each, one on May 6, 1948, and the other on January 10, 1949. A payment of $500 was made by the corporation on December 7, 1945, to Leroy Pumphrey, Esq., for legal services rendered in having the charter of the corporation restored. A payment of $250 was made by the corporation on March 3, 1948, for legal services to attorneys Baxter and Dingle.

After the election of a new board of directors, in June 1949, a suit was filed by the appellant against the appellees on the common counts and a special count for the recovery from the appellees of the following amounts paid by the appellees as officers and directors of the plaintiff corporation: To Leroy Pumphrey, $500; to Baxter and Dingle, $250; to W. Glen Abbott, $400; to Benjamin E. Abbott, $200; to Addison T. Smith, $1000. After trial, the trial judge, sitting as a jury, on January 4, 1950, entered a judgment in favor of the appellees for costs and from that judgment the appellant appeals. In the Court of Appeals, at the argument of the case, the appellant abandoned its claim for the $250 paid Baxter and Dingle and that item will not be again discussed here.

The appellant claims that without any authorization of the Board or stockholders the payment of $500 was made to Leroy Pumphrey, Esq. for services rendered in the receivership case for the Abbotts, from June, 1943, to December 7, 1945, to have the receivers discharged and the assets returned to the corporation; that during the time of Mr. Pumphrey's services the corporation was not in existence as the receivership was still in effect; that no claim for these services was made in the receivership case; and the Board of Directors never considered this payment. The appellant does not dispute the fairness of the Pumphrey charge but said it should have been paid by parties other than the corporation. The payment was made before December 17, 1945. The suit here before us was filed June 17, 1949. The cash book of the corporation showed the payment to Mr. Pumphrey. The trial judge found that this claim was barred by the statute of limitations, not having been sued on within three years. Code 1939, Article 57, Section 1. With this finding of the trial judge, we agree.

The claims of the Abbotts were for their services as statutory trustees from 1933 to 1940 under the provisions of Code, Article 23, Section 100, supra. This Section provides: 'Upon the dissolution of any corporation of this State in any manner otherwise than by judicial proceedings, and until other persons shall be appointed as receivers by some court of competent jurisdiction, the directors at the time of dissolution shall become and be trustees for the creditors, stockholders and members of the corporation so dissolved. They shall take title to its assets, real and personal, and shall have full power to wind up and settle its affairs, to use [sue] for and collect its assets and to pay its debts; and they shall divide among the stockholders or members, the money and other property that shall remain after the payment of the debts and necessary expenses; and the said trustees shall be jointly and severally liable to the creditors, stockholders and members of such corporation to the extent of its property and effects that shall come into their hands.'

W. Glen Abbott testified: 'It was for the period from 1933 to 1940, at the time we were legal trustees for the corporation under the law of the State of Maryland, something that we could not get out of.' He testified he and his brother, Benjamin Abbott, the surviving directors, handled $15,652.81, paying bills in the course of business, including income taxes and property taxes, collecting with great difficulty money from the lessee of the property, discounting notes at the bank and made trips to Baltimore on company business.

Judge Alvey speaking for this Court in the case of Cumberland Coal and Iron Company v. Parish, 42 Md. 598, aptly said at pages 605 and 606: 'The affairs of corporations are generally intrusted to the exclusive management and control of the board of directors; and there is an inherent obligation, implied in the acceptance of such trust, not only that they will use their best efforts to promote the interest of the shareholders, but that they will in no manner use their positions to advance their own individual interest as distinguished from that of the corporation, or acquire interests that may conflict with the fair and proper discharge of their duty. The corporation is entitled to the supervision of all the directors, in respect to all the transactions in which it may be concerned; and if one of the directors is allowed to place himself in the position of having his conduct and accounts made the subject of supervision and scrutiny, he, of course, cannot act, in regard to those matters, both for himself and the corporation; and the consequence is, that the corporation is deprived of the benefit of his judgment and supervision in regard to matters in which such judgment and supervision might be most essential to its interest and protection. Not only this, the remaining directors are placed in the embarrassing and invidious position of having to pass upon, scrutinize and check the transactions and account of their own body, with whom they are associated on terms of equality in the general management of all the affairs of the corporation. The design of the rule, therefore, is to secure a faithful discharge of duty, and, at the same...